The company processes over 15.5 billion US merchant transactions annually, making it the second-largest merchant processor behind First Data, according to The Nilson Report. And in the rapidly changing payments ecosystem, Vantiv is using digital innovation in an attempt to become the leading US payments processor. Already, Vantiv is the largest PIN debit processor.

We recently had an opportunity to sit down with Charles Drucker, Vantiv's CEO, Daniela Mielke, chief strategy and product officer, and Matt Taylor, group president of integrated payments and emerging channels, to discuss some of the biggest trends affecting processors and the payments industry as a whole, including Apple Pay, EMV, mobile point-of-sale, and Vantiv's growth strategy.

This is the first in a series of Vantiv Q&As BI Intelligence will be rolling out over the next few weeks. In this first segment, we focus on Apple Pay's impact on the payments ecosystem.

Mobile Payments

BI Intelligence: To begin, I have to ask you about mobile payments. You've got these huge tech companies — Apple, Samsung, and Google — some of which are just jumping into the fray and others that are doubling down their efforts. I'd love to hear your thoughts on where we are with respect to mobile payments and when we should expect to see them take off.

Charles Drucker: First of all, we like mobile payments because mobile payments accelerate the move from cash and check to electronic payments — so it's very positive. Usage of mobile payments and the various wallets will continue to accelerate as consumers get used to using them for different transactions and as merchants get the different devices so that they are accepted in more places. So over the near horizon you'll see it accelerating.

Vantiv
Daniela Mielke: Two things have to happen: One is that the infrastructure has to be ready, and the other is that the consumer has to start using it. We are already reaching an inflection point when it comes to the infrastructure. In the US, by the end of the year, about 50% of all terminals will be able to accept NFC; Android Pay will be on a billion handsets; and Samsung Pay will be everywhere. So infrastructure-wise, we're getting to a point where it could take off.

Where I would be a little more skeptical is the consumer. I think we have seen how new types of payments often take some time to take off — it just takes a long time for consumers to change their habits. I would think it's here to stay, but it will take years and years for it to become really mainstream. Now it's still the early adopters.

BII: Speaking to that point, we are seeing the beginnings of a mobile ecosystem that supports store cards, offers, and loyalty programs. Do you see that becoming a significant driver?

Vantiv
Matt Taylor: I think it has to be the driver. The chicken-and-egg problem — whether mobile payments would be driven by consumer demand or merchant acceptance — is solved. The infrastructure is set to drive it.

Two things will help accelerate adoption. One is giving us the motivation to take out our phone instead of our card — I think that's where loyalty, rewards, and other technologies that make it more exciting to pay with your phone come in.

We're also hitting the nexus of security technologies that are getting enabled at the point-of-sale. That will accelerate the infrastructure piece. As merchants upgrade to EMV and point-to-point encryption enabled terminals, they'll also be lighting them up with NFC capabilities: They'll be having a mobile conversation and a security conversation at the same time.

Mobile Security

BII: Security will likely be a driver of adoption of mobile payments on the merchant side, but it could also potentially be a driver on the consumer side. The big problem I see is that payments security is very complex to explain. Is there an effective way to communicate some of the security advantages of mobile to consumers?

MT: It's hard for a merchant to have a conversation with a consumer about security until behavior changes. When a chip card is presented and it is required that you dip that into a terminal, folks are going to start asking questions as to why this is happening. From a phone-based, NFC-based, Apple-based transaction, I don't think security comes to mind.

CD: I do think the banks — the financial institutions that are issuing the cards — are taking a more aggressive role in talking to the consumers not necessarily about tokenization, but about different ways to control fraud on the card.

DM: And, in general, consumers perceive mobile transactions as more risky, although they are not, but that is a general perception. I don't think that it's going to be the merchants or the banks that change it — it is going to be the big brands. A big brand has a lot of trust and people just think "if Apple is doing it, it is secure."

There was a lot of fraud with Apple Pay initially, but people understood it was actually an issue with the banks, it wasn't actually Apple. I think over time that fraud will go away.

MT: What I love about Apple Pay — I don't use it in terms of presenting my phone at the point-of-sale — but the cards that I have are on my phone — the transactions can be pulled up right away. So if somebody uses my card somewhere it would show up on my iPhone because it is embedded in the Apple wallet.